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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Classification of Cash Flows

Fannin Company is a manufacturer of premium athletic equipment. Fannin reported the following inflows and outflows of cash during 2019.

Chapter 11, Problem 54PSB, Classification of Cash Flows Fannin Company is a manufacturer of premium athletic equipment. Fannin

Fannin had cash on hand at 1/1/2019 of $118,250.

Required:

1. Prepare a properly formatted statement of cash flows using the indirect method.

2. CONCEPTUAL CONNECTION What can you conclude by examining the patterns in Fannin’s cash flows?

To determine

(a)

A cash flow statement is a budget report that gives total information in regard to all cash inflows an organization gets from its continuous tasks and outside venture sources, just as all cash outflows that compensation for business activities and speculations amid a given period.

To compute:

Prepare a properly formatted statement of cash flows the indirect method.

Explanation

In the books of Fannin Company

Prepare the cash flow statement:

Particular Detail ($) Amount ($)
Net income 594600
Depreciation expense 93410 93410
Operating profit before working capital changes 688010
Less: increase in accounts receivable (23400)
Add: decrease in inventory 61250
Add: decrease in prepaid insurance 47600
Less: Decrease in accounts payable (31550)
Add: Increase in wages payable 18200
Less: Decrease in income taxes payable (7600) 64500
Operating cash provided 752510
To determine

(b)

Checking cash flow is critical to a sound business. A cash flow statement examination is a profound jump into your business' budgetary wellbeing and is an approach to investigate your cash flow in and out all through a given timespan.

To discuss:

What can you conclude by examining the patterns in Fannin Company cash flows?

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